Event of Levy and Collection

In the case of COLLECTOR OF C. EX., HYDERABAD Versus VAZIR SULTAN TOBACCO CO. LTD.  [ 1996(86)E.L.T (S.C.] ) , in para 11 the Hon’ble Court observed  that Taxable event for Central Excise is the manufacture or production of goods and not the removal of goods - Section 3 cannot shift the levy from the stage of manufacture or production to the stage of removal, it only shifts the stage of removal and not the levy - Section 3 of the Central Excise and Salt Act, 1944 and Rule 9 of the Central Excise Rules, 1944.  

It appears from above citation that there is a lawful meaning of EVENT either it is levy or collection which has been covered in plethora of cases decided by the Hon’ble Apex Court of India.

The different stage of levy and collection of tax gives rise to the  intriguing question in my mind: “Whether point of collection of tax can be before  taxable event (i.e, point of levy) ? 

In the pursuit of finding the answer of the cited question, I   read number of case laws but couldn’t arrive at conclusion, few of them are being submitted here-under:

In the case supra, the Hon’ble Apex Court  also analyzed   the meaning of starting line of Section 3 of the Central Excise Act,1944  in para 6 & 7 i.e., “There shall be LEVIED and COLLECTED in such manner as may be prescribed.  Extract of Head note of the said para:  “It is evident that the words “in such manner as may be prescribed” qualify the word “collected” and not the word “levied”. While the levy is created by Section 3 itself, the collection of the duty is left to be regulated by the Rules made under the Act as the expression “prescribed” is defined in clause (g) of Section 2 to mean prescribed by Rules made under the Act. [paras 6, 7]”

In the case of Collector of Central Excise, Calcutta-II vs. Indo Japan Steel Ltd. [reported in 1997(92) E.L.T.292(S.C.)], the Hon’ble Supreme Court that Duty is  chargeable at the point of manufacture and not at the point of removal of goods from the factory, although for the sake of convenience levy and collection is provided for at the factory gate at the time of removal - Section 3 of the Central Excise Act, 1944 - Rule 9A of the Central Excise Rules, 1944 - Finance Act, 1979. [para 2]

In the case of Mangalore Refinery & Petrochemicals Ltd. [ reported in 2015(323)E.L.T.433(S.C.)), the Hon’ble Supreme Court  observed that a levy in the context of import duty can only be on imported goods, that is, on goods brought into India from a place outside of India. Till that is done, there is no charge to tax.

In Mafatlal Industries Ltd. Case [1997(89)E.L.T. 247(S.C.) ] The Hon’ble Court observed that : -

• “The constitutional embargo is on both the levy and collection of tax without authority of law. It has been repeatedly asserted by the Courts that every taxing law has three parts. First is charge, the second is computation which results in a demand of tax and the third is recovery of the tax so computed. The Constitution guarantees that not only the levy should be lawful but also collection of tax must also be done with the authority of law. [para 196]”
• Para 225.?The structure of the Excise Act has to be borne in mind. Duty is levied on manufacture and collected from the manufacturer according to the rules. The well-known distinction between levy and assessment and between levy and collection will have to be borne in mind in this connection. In the case of Collector of C. Ex., Calcutta Division v. National Tobacco Co. of India Ltd., 1978 (2) E.L.T. (J 416) (SC) = (1972) 2 SCC 560, it was held by this Court that :-

`The term “levy” appears to us to wider in its import than the term “assessment”. It may include both “imposition” of a tax as well as assessment. ------------------------------The Division Bench appeared to equate “levy” with an “assessment” as well as with the collection of a tax when it held that “when the payment of tax is enforced, there is a levy”. We think that, although the connotation of the term “levy” seems wider than that of “assessment”, which it includes, yet, it does not seem to us to extend to “collection”. Article 265 of the Constitution does not seem to us to extend to “collection”. Article 265 of the Constitution makes a distinction between “levy” and “collection”. We also find that in N.B. Sanjana, Assistant Collector of Central Excise, Bombay and Others v. The Elphinstone Spinning and Weaving Mills Co. Ltd., this Court made a distinction between “levy” and “collection” as used in the Act and the rules before us. -------------------------------------------

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 While reading down the preceding para of the National Tobacco Co. of India Ltd. case ,  I stopped at the observation of the Division Bench equating payment of tax with  levy  and  believe to get the answer of my question but the settled legal fact is that there is difference between levy and collection.

 I am parting out with my un-answered question.

Please share your views.

The views expressed in this article are my personal views.